Analysts Predict 20% Growth in Earnings

First quarter of fiscal 2018 revenues are expected to be 4% higher than a year ago

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Citigroup Inc. (C) will release its financial figures for the first quarter of fiscal 2018 this week before the market opens on April 13.

Consensus is for earnings per share of $1.62. That is a mean of 23 estimates that range from $1.55 to $1.79. Earnings per share are expected to increase by 20% compared to the same quarter of fiscal 2017.

The average revenue estimate for the quarter is $18.84 billion. This a 4% upside from the comparable of fiscal 2017. A total of 19 analysts were surveyed and their estimates range between $18.45 billion and $19.24 billion.

For full fiscal 2018, analysts predict Citigroup will report an earnings per share of $6.42 (+20.5% from full fiscal 2017) on a revenue of $74.06 billion. According to 24 analysts, revenue will grow 3.7% in 2018 from the previous year.

The charts below, which are powered by GuruFocus, show Citigroup’s annual net margins over the last ten fiscal years, as well as the U.S. giant bank’s interest revenues and net earnings:

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C data by GuruFocus.com

Citigroup's Net Margin (ttm) is -9.51% while the industry sas a net margin of 22.23%.

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Besides the net margin, which measures how profitable Citigroup’s business was over a certain period, I like to see how much of this profit came from borrowing rather than asset management and trading activities. That is measured by the net loans to total assets ratio, which is, computed over the trailing 12 months, 35.5% for Citigroup. The chart below, powered by GuruFocus, shows the trend in Citigroup’s net loans and total assets over the last 10 fiscals:

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The table below compares Citigroup’s net loan to total assets ratio with its most direct peers:

Item (in billions of USD), as of Q4 FY 2017 Wells Fargo & Co. JPMorgan Chase Citigroup Bank of America
Loan-to-assets ratio 49.5% 35.9% 35.5% 41.1%

With a loan-to-assets ratio of 35.5%, the chart shows that Citigroup’s net profit is more reliant on asset management and trading activities than Wells Fargo (WFC, Financial) and Bank of America (BAC, Financial).

In addition, Citigroup’s ROA is negative or -37%, versus an industry median of 87%.

With its quarterly report for the first three months of fiscal 2017, Citigroup will also provide shareholders with an update of the balance sheet. As of Dec. 28, 2017, the balance sheet shows the following:

An amount of $412.994 billion in cash on hand and securities; $1.259 trillion in long-term investments and $1.642 trillion in total liabilities.

Citigroup is trading around $68.6 per share and the market capitalization is $175.64 billion. The stock has a price-book ratio of 0.97 versus an industry median of 1.24, a price-sales ratio of 2.58 versus an industry median of 3.56 and a price-earnings ratio of 9.28 versus an industry median of 15.27.

Citigroup is currently mimicking the Peter Lynch Earnings Line (P/E = 15) while above the Price at Med P/E without NRI (P/E = 12.28) line:

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GuruFocus also indicates that the forward price-earnings ratio is 10.76 versus an industry median of 13.87. When this ratio is multiplied by $6.66, which is an average quarterly weighted earnings per share for full fiscals 2018 and 2019, it yields a value of $71.66.

The average target price is $83.41 per share, which is 21.6% higher than the current market value per share.

According to GuruFocus, Citigroup is currently reporting 2.56 billion shares outstanding, of which a percentage of 81.92% is held by institutions. Insiders hold 2.34% of its stock.

Among the top shareholders of Citigroup, Blackrock Inc. and Vanguard Group, Inc. are the most prominent with portions of 7.33% (+2.8% from the third-quarter of 2017) and 7.09% (+1.7% from the previous quarter). Holdings are as of Dec. 30, 2017.

Among the top institutional holders of Citigroup are also JPMorgan Chase & Company (JPM, Financial) with a 1.92% stake (+3.2% from the previous quarter) and Bank of New York Mellon Corp. (BK) with 1.63% (-6.3% from Sept. 30, 2017 to Dec. 30, 2017).

(Disclosure: I have no positions in any stock mentioned in this article.)